Microsoft reported fiscal Q2 revenue of $81.3 billion, a 17% year-over-year increase, and operating income of $38.3 billion, up 21% from the prior year. While these results exceeded analyst estimates for both top-line and adjusted EPS, the company’s share price fell by mid-single digits in after-hours trading, driven by investor concerns over its rapidly rising AI-related capital spending.

The Intelligent Cloud segment delivered $32.9 billion in revenue, up 29% year-over-year, with Azure and other cloud services growing 39% on a reported basis. Microsoft Cloud as a whole crossed the $50 billion quarterly revenue milestone for the first time, reflecting strong enterprise adoption of large-scale AI training and inference workloads on Azure’s hyperscale infrastructure.

Microsoft’s capital expenditures jumped 66% year-over-year to $37.5 billion, two-thirds of which were allocated to short-lived assets such as GPUs and CPUs required for AI compute. CFO Amy Hood and CEO Satya Nadella emphasized during the earnings call that these investments are pre-sold for their entire useful life and are essential to maintaining Azure’s scale advantage and delivering integrated AI services.

Commercial remaining performance obligations increased by 110% to $625 billion, underscoring the stickiness of long-term Azure and AI contracts. Approximately 45% of this backlog is attributed to OpenAI commitments, while Microsoft retains 80% of OpenAI model sales through its platform. The company’s net property and equipment assets rose to $261 billion, highlighting a strategic shift toward controlling the full AI technology stack and supporting sustained enterprise demand.